ByIan Deitch, Associated PressDecember 14, 2012

Israeli Foreign Minister Avigdor Lieberman is seen during a convention of his Yisrael Beiteinu party in Jerusalem, in this April 2011 photo. Mr.Lieberman said on Friday he was resigning after being charged with fraud and breach of trust, in a move that could have repercussions on the upcoming general election.

Jerusalem — Israel's powerful foreign minister announced his resignation from government Friday, a day after an indictment for breach of trust was filed against him by the country's attorney general, in a move that shakes up the election campaign and heavily impacts Prime Minister Benjamin Netanyahu's election calculations.

Avigdor Lieberman continued to maintain his innocence in a statement and indicated that he could return to politics in time for the national elections in January if he was cleared or could reach a plea bargain.

"Even though I know I did not break any law ... I have decided to resign from my position as foreign minister and deputy prime minister," Mr. Lieberman said. "After 16 years of investigations against me I can end this issue quickly without delay and completely clear my name," he said.

Lieberman said he made the decision Friday after conferring with his lawyers and with his election campaign staff. "I am doing this because I am convinced that Israel's citizens should be able to go to the polls after this matter has been settled ... and I can continue to serve the state of Israel and Israel's citizens as part of a strong united leadership that will cope with the security, economic and political challenges it faces," he said.

Lieberman was charged Thursday with breach of trust in a fraud and money-laundering case threatening to upend the Israeli political system just a month before parliamentary elections.

The Soviet-born Lieberman is head of Yisrael Beitenu, an ultranationalist party that is especially popular with immigrants from the former Soviet Union. With a tough-talking message that has questioned the loyalty of Israel's Arab minority, sharply criticized the Palestinians and confronted Israel's foreign critics, he has at times alienated Israel's allies while becoming an influential voice in Israeli politics.

Yisrael Beitenu and Mr. Netanyahu's Likud Party recently joined forces and are running together on a joint list in the Jan. 22 parliamentary elections. Opinion polls have predicted the list would be by far the largest bloc in parliament and lead a new coalition government.

Netanyahu is heavily favored to win the premiership, but Lieberman's departure will have a major impact on negotiations to build a governing coalition. Lieberman is Yisrael Beitenu's founder and main attraction to voters. If he were forced to step aside, Netanyahu would be stuck with a list of leftovers with little appeal to the general public.

Former Foreign Minister Tzipi Livni of the new "Movement" Party issued a statement welcoming Lieberman's departure. "Avigdor Lieberman did the right thing," she wrote.

Prosecutors have long suspected that Lieberman illicitly received millions of dollars from businessmen and laundered the cash through straw companies in eastern Europe while he was a lawmaker and Cabinet minister. In his decision Thursday, Attorney General Yehuda Weinstein said the case was not strong enough.

"I am convinced that there is no reasonable chance of a conviction in the offenses Lieberman is suspected of and that case should be closed," Mr. Weinstein said in his decision.

Instead, Lieberman was charged with the lesser offense of receiving official material from the investigation against him from the former Israeli ambassador to Belarus.

The envoy had received the documents from the foreign ministry, which sought additional information on Lieberman from Belarus authorities. The ambassador, Zeev Ben-Aryeh, reached a plea bargain in the case earlier this year. At a press conference Thursday night, Lieberman said that when he received information about the investigation from his ambassador, he immediately ripped it up and flushed it down the toilet because he knew it was wrong.

Previous court rulings in other, more serious criminal cases against Cabinet officials have forced them to resign. Facing the prospect of an indictment, former Prime Minister Ehud Olmert announced his decision to step down in 2008 before formal corruption charges were filed against him. Mr. Olmert this year was cleared of most charges, but convicted of breach of trust.

"Lieberman's resignation was very important because it strengthens the norms of our court system where if an official is suspected of corruption they step down even though legally they don't have to, in order to preserve the public's faith in the government," said Moshe Negbi, Israel Radio's legal affairs commentator.